Megabanks, bailouts, and TARP money (union, credit, mortgage, companies)
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While I am no fan of the megabanks because I believe them to be guilty for their role in our country's economic meltdown of 2007/2008, neither can I subscribe to the overwrought emotionalism directed against them. One aspect of that emotionalism has to do with the TARP bailouts; some posters here act like the taxpayers just gave the banks a gift, totally ignoring the fact that TARP was not a gift, that it has been largely repaid, and that it came with strings which held the banks' feet to the fire in terms of bolstering their finances and limiting their executive compensation. Those strings were one reason the banks were so eager to pay the money back.
An article in the business section of the Los Angeles Times of September 30, 2011, states: "Most banks have repaid their TARP money. As of Aug. 31, the Treasury had received $183 billion of the $205 billion distributed to financial institutions. The Treasury also got $26 billion from dividends, interest and stock, resulting in a slight profit for the program."
Here is the timeline on which the megabanks repaid their TARP money:
June 2009: JPMorgan Chase and Goldman Sachs
December 2009: Bank of America, Wells Fargo and Citigroup
February 2010: PNC
What the article does not say, and what I would be interested to know, is the names of the banks still owing TARP money and the amounts owed by each. The idea of government bailing out private firms is indeed distasteful, but I am trying to bring some factuality to the discussion of TARP. Calling it corporate welfare is not entirely wrong, but is at the very least misleading; the common understanding of the word "welfare" does not include the money being paid back, which to me is the bottom line.
Thank you, Txgolfer130. I asked, and you provided. That is a fascinating list, arranged in order of the amount of the bailout, from largest to smallest, with a separate column for "revenue to govt." which indicates interest/dividends and the like earned regardless of the amount paid back. Here are some of the things I found especially interesting:
1. The smallest amount on the list, $7,000, was disbursed to East End Baptist Tabernacle Federal Credit Union in Conn. None of it has yet been paid back, but the govt. has earned $88 in revenue (interest, I would presume).
2. There are 926 recipients listed. I found that staggering.
3. Most of the recipients were financial institutions; thus, General Motors and Chrysler were rare exceptions. General Motors, fourth on the list, has paid back $23 billion of the $51 billion disbursed.
4. Fannie Mae and Freddie Mac, first and third on the list, respectively, haven't paid back any of the TARP money, but govt. has earned $15 billion and $13 billion from them, respectively, so far.
5. The megabanks have all paid back their TARP money in full, except for their mortgage servicing units, which are listed separately, and which were given relatively small amounts compared to the banks themselves.
6. I didn't see (but may have just missed) the date of the updating of the amounts on the list.
Again, I greatly appreciate that link, especially inasmuch as it fosters a rational and factual discussion of TARP, which can so easily turn very emotional.
some posters here act like the taxpayers just gave the banks a gift, totally ignoring the fact that TARP was not a gift, that it has been largely repaid, and that it came with strings
I've noticed this too, and it is far more prevalent in the political forum. So many angst-ridden references to TARP/bailout acting like it was just a government gift.
I've noticed this too, and it is far more prevalent in the political forum. So many angst-ridden references to TARP/bailout acting like it was just a government gift.
Yeah, I don't read the Political Forum. I don't have the patience to deal with the amount of inflammatory rhetoric and the militant ignorance there. There is quite enough of it in the other general forums. Note I am not saying we shouldn't criticize TARP, or certain aspects of TARP. It's just that there should be a minimum of factuality that goes along with the discussion.
While I am no fan of the megabanks because I believe them to be guilty for their role in our country's economic meltdown of 2007/2008, neither can I subscribe to the overwrought emotionalism directed against them. One aspect of that emotionalism has to do with the TARP bailouts; some posters here act like the taxpayers just gave the banks a gift, totally ignoring the fact that TARP was not a gift, that it has been largely repaid, and that it came with strings which held the banks' feet to the fire in terms of bolstering their finances and limiting their executive compensation. Those strings were one reason the banks were so eager to pay the money back.
An article in the business section of the Los Angeles Times of September 30, 2011, states: "Most banks have repaid their TARP money. As of Aug. 31, the Treasury had received $183 billion of the $205 billion distributed to financial institutions. The Treasury also got $26 billion from dividends, interest and stock, resulting in a slight profit for the program."
Here is the timeline on which the megabanks repaid their TARP money:
June 2009: JPMorgan Chase and Goldman Sachs
December 2009: Bank of America, Wells Fargo and Citigroup
February 2010: PNC
What the article does not say, and what I would be interested to know, is the names of the banks still owing TARP money and the amounts owed by each. The idea of government bailing out private firms is indeed distasteful, but I am trying to bring some factuality to the discussion of TARP. Calling it corporate welfare is not entirely wrong, but is at the very least misleading; the common understanding of the word "welfare" does not include the money being paid back, which to me is the bottom line.
The problem is really precedence. TARP sealed too big to fail. It took a larger number of smaller megabanks and turned them into a smaller number of larger too big to fails. In return for a few billion in profit, we've put the last and final nail in the coffin of socialized risk for private industries. We've sent the message to go ahead and seek profits irrespective of risk because risk is born by the tax payer. A few billion in profit for taking on trillions of dollars of liability as an implicit guarantor? That's a failing proposition. The money spent socializing Freddie/Fannie eclipses the pitiful few billion TARP has netted.
The problem is really precedence. TARP sealed too big to fail. It took a larger number of smaller megabanks and turned them into a smaller number of larger too big to fails. In return for a few billion in profit, we've put the last and final nail in the coffin of socialized risk for private industries. We've sent the message to go ahead and seek profits irrespective of risk because risk is born by the tax payer. A few billion in profit for taking on trillions of dollars of liability as an implicit guarantor? That's a failing proposition. The money spent socializing Freddie/Fannie eclipses the pitiful few billion TARP has netted.
Agreed, Too Big To Fail is a disastrous precedent and the consolidation into even larger institutions leaves us worse off than we were before. I'm fine with these megabanks making money, but when we socialize the losses so that they only experience the rewards and not the failure, there is a problem. Just looking at the repayment of TARP funds misses the bigger point.
I've noticed this too, and it is far more prevalent in the political forum. So many angst-ridden references to TARP/bailout acting like it was just a government gift.
The bailouts were nothing more than a government gift to the large players in the global financial sector. TARP is only one program, out of many.
Tarp and it's other programs was and continues to be a gift to the banks, Because the money was lent to the banks at little to no interest, then the banks turned around and lent the money back to the fed for a higher rate, IE free money to the big banks
if you have 20 or 30 minutes to spend, this guy understands some of these issues better than i do, and he discusses some aspects of how current policy benefits the financial sector.
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